Tax calculatorDubai
Corporate Tax in Dubai (UAE)
Since June 1, 2023, Dubai and the entire UAE have implemented a specific form of corporate taxation directly related to the net profits of corporations, as well as various other forms of businesses – the corporate tax.
Corporate Tax in Dubai and the UAE
The taxable income of a UAE company for the respective tax period is determined from the accounting net profit or net loss.
Practical Example for Clarification:
Let’s assume a company based in Dubai (UAE) generates a net profit of AED 1,000,000 in the corresponding tax period (accounting period):
- A net profit of up to AED 375,000 per fiscal year is taxed at a 0% tax rate (annual exemption).
- The net profit exceeding the exemption threshold of AED 375,000 per fiscal year is taxed at 9%.
This results in a taxable profit of AED 625,000 . The corporate tax to be paid on this is 9%, corresponding to AED 56,250 . If available tax credits exist, the payable corporate tax is reduced accordingly.
Corporate Tax in UAE Free Trade Zones
Companies registered in a Dubai Free Trade Zone or any other free trade zone within the UAE, and meeting the criteria of a “qualified free zone company,” are subject to Dubai corporate tax under specific conditions:
- 0% corporate tax is applicable to the so-called “qualified income,”
- for incomes not classified as “qualified income,” the tax rate is 9%.
A company in a UAE free trade zone, qualifying as a “qualified free zone company” and meeting the associated criteria, can benefit from the 0% taxation within the free zone by default. However, there is an option to opt out of this arrangement and subject to the general corporate tax.
Criteria of “Qualified Free Zone Companies”
- The company must have a significant presence in the UAE, and “qualified income” must comply with legal requirements.
- It must ensure that transfer pricing regulations are always complied with and documented. Additionally, the company must not have chosen to be subject to the general Dubai corporate tax in full.
Business Sectors of Qualified Free Zone Companies
- Manufacturing of goods and materials,
- Processing of products,
- Holding of stocks and other securities,
- Management of shipping companies,
- Reinsurance services (regulated by competent authorities),
- Fund management and asset management (also regulated),
- Central services for associated companies,
- Financial services and treasury activities,
- Aircraft financing and leasing,
- Sale and distribution of goods and materials,
- Logistics services,
- and all activities directly related to the above points.
Facilities for Small Businesses in the UAE
In addition to the tax advantage of 0% on profits up to AED 375,000 , small businesses with a turnover below a specified threshold have the opportunity to apply for a “small business bonus.”
This arrangement is available for companies or self-employed individuals based in the UAE whose turnover falls below a limit set by the Minister and who meet all other criteria.
The following key points should be noted:
- No corporate tax – the turnover threshold to qualify as a small business is AED 3,000,000 per accounting period. This threshold applies from June 1, 2023, to December 31, 2026.
- If a company exceeds this value, it cannot claim the small business bonus. Incomes must be recorded according to current accounting standards.
- Companies belonging to a multinational group or qualifying as a “qualified free zone company” cannot request this bonus.
- Tax losses during a period in which the small business bonus was claimed are not transferable to subsequent periods. Unclaimed tax losses from previous periods can be carried forward in accordance with the corporate tax law.
- Interest expenses incurred during a period with the small business bonus are also not transferable. Previous interest expenses without this bonus can be carried forward according to the corporate tax law.
- If the regulatory authority detects that companies have artificially separated their activities to avoid exceeding the threshold and claim the bonus, this will be considered an attempt to obtain tax benefits unfairly.
- The authority evaluates the integrity of the business model and the similarities of business activities, considering various criteria, including financial and organizational connections.
“`
UAE Sales and Value Added Tax (VAT)
If a company has a turnover exceeding the specified threshold of AED 375,000 , it must register for Value Added Tax (VAT).
Additionally, companies have the option to proactively register for VAT (Value Added Tax), even if their turnover is below this AED 375,000 threshold but exceeds AED 187,500 .
The same applies to companies whose expenses exceed the threshold for this option. This offer is especially intended for newly established companies with no turnover who wish to consider Value Added Tax from the outset.
Please understand that these brief explanations are not legal or tax advice. They are simply intended to provide you with an initial insight into the Corporate Tax Law of Dubai and the UAE and do not cover every individual case. Therefore, this information is not exhaustive.
Every company and individual entrepreneur should seek individual advice regarding their tax matters before making a decision.
If you have any questions regarding this or any other topic, our specialists and tax advisors are available to assist you at any time.
We are happy to assist!
for a free consultation
with one of our experts
 – Flexibel. Wirtschaftlich. International.vg "Ras Al Khaimah Economic Zone (RAKEZ) – Flexible. Economic. International.")